Apple Is Working On Smaller, Cheaper iPhone Nano To Counter Android: Bloomberg

We like the sound of this one: Apple is rumored to be working on a smaller, cheaper iPhone — the iPhone nano. Best of all, the $200 iPhone will be contract free and may be dual-mode.

According to Bloomberg, the new handset will be about one-third smaller and be based on older, cheaper components to keep the price down. Apple already has a prototype (more likely, prototypes) and plans to introduce the new iPhone mid year.

The new iPhone may also be dual-mode. Bloomberg says Apple is also working on a dual-mode GSM and CDMA handset that would work on almost all networks — this may or may not the iPhone 5, and may or may not be in the new, smaller iPhone. Would make sense if it was though.

The cheaper handset is to counter the relentless march of Android phones, which are beating iPhone market share (but not iOS market share).

Bloomberg has great sources and has a good track record with Apple rumors. If true, it’s huge. It would upend carrier subsidies and the whole wireless business, givung control back to consumers and device makers.

As we noted in our prediction piece, Apple is currently competing only at the high-end, and has nothing to counter Android at entry-level prices. We predicted Apple will introduce a cheaper iPhone this year to widen the “price umbrella.” We called the cheaper iPhone, the “iPhone play.”